Cray agrees to acquire Appro for $25 million and plans a Cluster Solutions division to make high-end industry-standard servers

Cray on Friday agreed to acquire server maker Appro International for US$25 million in cash as it looks to strengthen its high-performance computing product portfolio.

Cray will integrate Appro's operations into a new Cluster Solutions division, Cray said. The company will sell Appro's high-performance computing products, including cluster servers and software to manage network, server, and storage elements inside high-end servers.

The Appro deal is expected to close in the next few days, Cray said. About 90 employees from Appro will join Cray, and the Cluster Solutions division will be run by Daniel Kim, the CEO of Appro, which is based in Milpitas, California.

With the acquisition, Cray is trying to differentiate its high-performance computers based on custom interconnects from servers using industry-standard components and interconnects, said Barry Bolding, vice president of storage and marketing.

An example of Cray's supercomputer is the XK7 system, which was announced last week and uses a custom interconnect. The 20-petaflop Titan supercomputer at the U.S. Department of Education's Oak Ridge National Laboratory in Tennessee, is an XK7 system. Cray earlier this week announced the new XC30 supercomputer, which is based on a new server architecture and interconnect.

"The Appro division will be focused initially on Infiniband solutions," Bolding said.

Bolding said Appro specializes in the manufacturing and design of cost-sensitive servers with standard components. Appro came at a good price and Cray needed that expertise.

"We thought about starting a [cluster] division for a long time," Bolding said.

With Appro, Cray will intensify its competition with the likes of Hewlett-Packard, Dell, IBM and Quanta, which offer branded and barebones servers based on industry standard components.

Cray has been reconstructing its supercomputing business this year, selling its interconnect assets to Intel for $140 million in April. The company now licenses the interconnect technology from Intel for its supercomputers.

Cray on Friday also reported a net loss and revenue drop for the third quarter ending on Sept. 30. The company's revenue was $35.7 million, falling from $36.7 million recorded in last year's third quarter. The net loss was $5.2 million, or $0.14 loss per share, compared to a $0.35 loss per share in last year's third quarter.

Cray and Appro will benefit from the merger, said Steve Conway, research vice president for high-performance computing at IDC.

Appro sells its servers largely to U.S. universities and government organizations and Cray will provide a worldwide reach, Conway said.

Cray's magic sauce has been to construct big computers based on specialized interconnects and topologies. Cray won some big-ticket deals with its servers, but needed to add Appro's mainstream products to sell more servers, Conway said.

"Appro is in an equivalent position, but it uses industry standard hardware," Conway said. "They have parallel paths with similar goals."

Cray has also been attempting to break into the Big Data market with its specialized servers and appliances. With more mainstream servers handling workloads like databases and analytics, Cray had to offer mainstream HPC products, Conway said.

Customers buying specialized computers also require mainstream computers and Cray's sales force will now be able to offer both, Conway said.